On April 4, the house judiciary committee passed the NOPEC bill, saying NO directly to the organization of the petroleum exporting countries (OPEC). It allows U.S. companies to file antitrust suits against OPEC and prohibits any foreign organization from conspiring to fix fossil fuel prices. On April 5th Saudi Arabia's top energy official revealed that it was considering ditching the dollar for other currencies in oil deals. Given that Saudi Arabia has close to $1tn of direct investment in the US and $160bn of US Treasury holdings, a real shot in the arm would end decades of petrodollar hegemony. Interestingly, the petrodollar, the cornerstone of the dollar's international standing, was born out of the deal struck between the US and Saudi Arabia.

 

It is not hard to see why Saudi Arabia would offer this option as a counterattack. OPEC currently supplies about one-third of the world's oil production. Saudi Arabia alone controls 10% of global oil production. So Saudi Arabia, the country most affected, will not sit idly by. Becoming the settlement currency for oil transactions is a dream for many countries. If the Saudis do abandon the petrodollar, not only will the American dream be shattered, but the embodiment of its value will be found again.

 

Now, if Saudi Arabia were to abandon petrodollars, it would seriously undermine the dollar's status as the world's main reserve currency, reduce the US's influence in global trade and weaken its ability to impose sanctions.




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